measuring poverty, hardship and living standards in new zealand: a brief overview bryan perry
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Measuring poverty, hardship and living standards in New Zealand: a brief overview Bryan Perry Ministry of Social Development, NZ 2nd Peter Townsend Memorial Conference Bristol, January 2011. Introduction. New Zealand does not have an official measure of poverty or material hardship … - PowerPoint PPT PresentationTRANSCRIPT
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Measuring poverty, hardship Measuring poverty, hardship and living standards in New and living standards in New
Zealand:Zealand:a brief overviewa brief overview
Bryan PerryBryan PerryMinistry of Social Development, NZMinistry of Social Development, NZ
2nd Peter Townsend Memorial Conference2nd Peter Townsend Memorial ConferenceBristol, January 2011Bristol, January 2011
Bryan Perry, Jan 2011Bristol
Introduction
• New Zealand does not have an official measure of poverty or material hardship …
• the Ministry of Social Development reports on:– income distribution and income poverty using a range of
measures– material hardship and deprivation using non-monetary
indicators
• Statistics New Zealand sends NZ income distribution and income poverty information to the OECD
• involvement by state agencies is relatively recent– Brian Easton– NZ Poverty Measurement Project
Bryan Perry, Jan 2011Bristol
Introduction (cont’d)
• MSD also publishes an annual ‘Social Report’– includes income distribution and poverty information …– but it has a wider scope - 10 domains, 43 indicators
• some limited use of ‘social inclusion’ / ‘social exclusion’ discourse … some on ‘social cohesion’ … more about ‘social and economic wellbeing’
• some use of an ‘underclass’ notion by current PM
• the major data gap in NZ is for the dynamics of poverty and hardship … social mobility
Bryan Perry, Jan 2011Bristol
Outline
• active promotion of a common language and understanding around poverty and hardship
• using HH incomes– relative and fixed (anchored) poverty lines– an illustration of the limitations of the incomes approach
(older NZers)
• using non-monetary indicators to construct more direct measures of material wellbeing
– the ELSI measure – its development, properties and value– addressing some of ELSI’s limitations – international comparisons– next steps?
Bryan Perry, Jan 2011Bristol
Active promotion of the big ideas
• idea of ‘poverty’ in richer nations– we use the EU’s high level conceptualisation
• income poverty & deprivation – different constructs
• poverty and hardship are multi-dimensional … even more so if ‘causes’ and ‘consequences’ are included … but we try to keep an uncluttered focus on the goods, services and opportunities that money can buy
• cannot avoid judgment in setting thresholds … but some thresholds are much more plausible / defensible than others
Bryan Perry, Jan 2011Bristol
HH income Living standards
Income and living standards
Bryan Perry, Jan 2011Bristol
Current income (eg last 12 months)
Living standards
Previous income
Assets
+
+
Contributions to budget not picked up in ‘current income’
eg HH production, help from outside the HH
+
Govt services & subsidies
+
Special demands on budgeteg unexpected bill
health/disability costs high housing costssupport for others o/s
HH
_
expected future income
Access to other services
& amenities
+
Bryan Perry, Jan 2011Bristol
Current income (eg last 12 months)
Living standards
Previous income
Assets
+
+
Contributions to budget not picked up in ‘current income’
eg HH production, help from outside the HH
+
Govt services & subsidies
+
Special demands on budgeteg unexpected bill
health/disability costs high housing costssupport for others o/s
HH
_preferences
& wants?
expected future income
Access to other services
& amenities
+
Bryan Perry, Jan 2011Bristol
Trends in HH incomes and income poverty, 1982 to 2009
Bryan Perry, Jan 2011Bristol
Median HH income ($2009), 1982-2009, NZ
0
5
10
15
20
25
30
35
40
1980 82 84 86 88 90 92 94 96 98 00 02 04 06 08 2010HES Year
Equi
valis
ed H
H in
com
e in
$20
09 (0
00's
)
Bryan Perry, Jan 2011Bristol
Income poverty rates, 1982 to 2009, NZ
0%
5%
10%
15%
20%
25%
30%
35%
1980 82 84 86 88 90 92 94 96 98 00 02 04 06 08 2010
HES year
Prop
ortio
n of
pop
ulat
ion
belo
w th
resh
old
60% REL
Bryan Perry, Jan 2011Bristol
Income poverty rates, 1982 to 2009, NZ
0%
5%
10%
15%
20%
25%
30%
35%
1980 82 84 86 88 90 92 94 96 98 00 02 04 06 08 2010
HES year
Prop
ortio
n of
pop
ulat
ion
belo
w th
resh
old
60% 98 FIXED
60% REL
Bryan Perry, Jan 2011Bristol
The limitations of relying on an incomes approach alone:
the case older New Zealanders (65+)
• NZ has a two-tier system of retirement income provision
– NZ Superannuation - a universal pension, neither income nor asset tested
– private provision by citizens– no earnings-related component
• around half of older NZers have incomes of NZS plus less than $100 pw from other sources
Bryan Perry, Jan 2011Bristol
Income poverty rates using different thresholds, by age group, 2008
0
10
20
30
40
50
60
70
42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80
Threshold as a proportion of the median (%)
Prop
ortio
n be
low
thre
shol
d (%
)
65+
under 18
total
18-64
Bryan Perry, Jan 2011Bristol
Using NMIs: our general approach• information from individual items is useful … but need
multiple items working together for a robust picture
• we don’t directly use the ‘socially defined necessities’ approach with, say, a 3+ lack defining ‘deprivation’
• we use the ‘enforced lack’ notion … … but are very conscious of the impact of ‘adaptive preferences’
• deprivation (and material living standards more generally) is conceptualised as a latent variable reflected in the pattern of association between a number of observable indicators
Bryan Perry, Jan 2011Bristol
Using NMIs: our general approach (cont’d)
• the indicators or survey items cover the ‘necessities’, ‘desirables’, and ‘(common) luxuries’ categories
– development of a full range living stds index (low to high)– reality of consumption decisions within HHs – even the
relatively poor have some ‘desirables’, even a few ‘luxuries’
• no explicit attempt to derive an income poverty line using NMIs …
– but we use the steepening of the gradient of the core necessities vs income curves to provide credibility for the thresholds we do use
Bryan Perry, Jan 2011Bristol
Can the ‘enforced lack’ NMI approach to measuring hardship be extended
to cover a wider range of living standards, from low to high?
Bryan Perry, Jan 2011Bristol
Extending the enforced lack NMI approach to cover a wider range of living standards?• the development goal
• candidate items to use in the extension
• the model and the model fit (CFA)
• a user-friendly version (ELSI and ELSI levels)
• validation
• point in time findings using ELSI
• a closer look at the underlying conceptualisation of living standards for ELSI
• implications of this for measuring changes over time
• next steps
Bryan Perry, Jan 2011Bristol
Stylised summary of development goal
0
20
40
60
80
100
0 10 20 30 40 50 60 70 80
Cum
ulat
ive
perc
enta
ge (%
)
mainly necessities, a fewdesirables
material hardship from 'just getting by' to very good living standards
Bryan Perry, Jan 2011Bristol
Stylised summary of development goal
0
20
40
60
80
100
0 10 20 30 40 50 60 70 80
Cum
ulat
ive
perc
enta
ge (%
)
mainly necessities, a fewdesirables
more desirables and'luxuries' added
material hardship from 'just getting by' to very good living standards
the development goal
Non-linear ordinal scale, running from low to high material living standards
Bryan Perry, Jan 2011Bristol
Wider range of items
• in addition to the usual ‘necessities’ and ‘near necessities’, we needed some items that generally reflected higher living standards
• tried various consumer durables … such as a dishwasher (too much variation across groups ...)
• overseas holiday once each 3 years (ie no EL)• economising items (‘not at all’) eg
– cut back on local trips to visit friends and relatives– put off buying new clothes as long as possible– bought cheaper or less meat than wanted to
• self-rated material standard of living
Bryan Perry, Jan 2011Bristol
The first model
Ownership ELs
Participation ELs
Economising
Financial hardship
Housing problems
SR material LS
SR income adequacy
Material living
standards
Bryan Perry, Jan 2011Bristol
The first model
Ownership ELs
Participation ELs
Economising
Financial hardship
Housing problems
SR material LS
SR income adequacy
Material living
standards
Bryan Perry, Jan 2011Bristol
The current model
Ownership ELs
Participation ELs
Economising
SR material LS
SR income adequacy
Material living
standards
SR satisfaction with LS
Added to stretch the top end more
Bryan Perry, Jan 2011Bristol
Extending the NMI deprivation approach ….
• CFA analysis for a five factor model reflecting a single latent variable - model fit very good
• reliability also very good (Cronbach of 0.79)
• we created a user-friendly version of the scale, with scores ranging from 0 (low) to 60 (high living standards)
– correlation of 0.98 with generic scale– ‘ELSI’ (the Economic Living Standards Index)– for presentation purposes, created 7 ‘levels’ from very low
to very high living standards– Levels 1 and 2 – clear hardship zone– Level 3 – hardship?
Bryan Perry, Jan 2011Bristol
Distribution of ELSI scores by ELSI levelwhole population, 2008
67
10
18
23
26
9
0
10
20
30
ELSI levels (1-7)
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Validity?
• to what degree can we trust an instrument to be measuring what it claims it measures?
• requires a careful marshalling of evidence from different sources – cumulative, never ‘final’
* * * * * * * * *- items … close examination - not covered today
- internal structure - CFA and reliability
- relationship with other variables - next section
- consequences in practice - later
- re-examination of underlying construct - later
Bryan Perry, Jan 2011Bristol
Non-ELSI items: negative association with ELSI
23
52
31
9
33
18
3
23
7
0
13
30
4
00 0 00 0 00
20
40
60
meal with meat, chicken orfish at least each 2nd day
[EL]
could not pay utilities ontime in last 12 mnths [MORE
than ONCE]
help with food, clothes ormoney from NGO welfareagency in last 12 mnths
[MORE than ONCE]
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Non-ELSI items: negative association with ELSI75
28
53
68
15
42
55
12
32
37
9
26
20
8
16
5 4
14
02 2
0
20
40
60
80
books, music CDs ordownloads [cut back / went
without A LOT]
crime / vandalism in theneighbourhood [MAJOR
problem]
quality of accommodationpaid for on holidays [N/A]
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Non-ELSI items: positive association with ELSI
17
29
39
25
4749
42
5254
41
67
78
56
78
83
63
89
94
75
93
98
0
20
40
60
80
100
current health self-rating [VG / EX]
overall condition of home(GOOD / VG]
overall satisfaction with life[SATISFIED / V SATIS]
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Non-ELSI items: positive association with ELSI
11
0
11
23
0
16
38
2
24
53
5
30
72
15
41
89
41
57
99
72 71
0
20
40
60
80
100
delayed repair /replacement of appliancesnot working [NOT AT ALL]
spot purchase of non-essential but desirable $250
item [NO RESTRICTION]
quality of kitchen andkitchen appliances [TOP of
RANGE / GOOD]
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Using ELSI for point in time comparisons
Bryan Perry, Jan 2011Bristol
ELSI levels by age group, 2008
10
2
6 6
2
10 98
6
2
14
9
11
8
3
22 2220
15
10
22
27
2523 23
17
26
23
31
46
76
8
1214
0
10
20
30
40
50
0-17 years 18-24 years 25-44 years 45-64 years 65+ years
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
ELSI levels by family income source, 2008
26
42
21
6
2
18
10
3
19 20
1010
2523
5
26
46
0
10
14
0
10
20
30
40
50
Income-tested benefit Market <65 65+
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
ELSI levels by family type (under 65), 2008
6
3
22
4
8
4
15
7
9
7
19
11
20
13
2122
24 25
13
2625
34
8
23
8
14
3
8
0
10
20
30
40
One person Couple only Sole parent Two parent
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
ELSI levels by tenure, 2008
31
4
10
32
5
1
6
12
20
10
4
6
14
2121
9
16
24
13
27
2325
21
9
26
44
31
16
4
7
19
13
4
1
0
10
20
30
40
50
Owned withmortgage
Ownedmortgage free
Family trust Private Landlord HNZC
Popu
latio
n pe
rcen
tage
Bryan Perry, Jan 2011Bristol
Children’s items by family ELSI level, 2008
4244
4038
11
1613
23
9 9
5
13
3 41
4
0 0 0
4
0 0 0 00 0 0 00
20
40
60
2 pr strong / sturdyshoes for each child
[EL]
a waterproof coat foreach child [EL]
have children'sfriends to a birthday
party [EL]
children went withoutmusic, art, dance,
swimming lessons [ALOT]
Prop
ortio
n of
chi
ldre
n (%
)
Bryan Perry, Jan 2011Bristol
Children’s items by family ELSI level, 2008
61
47
31
39 40
17
33
26
12
19
14
4
129
47
301 1 0
0
20
40
60
80
house difficult to keep warmin winter [MAJOR problem]
dampness or mould [MAJOR problem]
enough bedrooms forchildren of opposite sex
(aged 10+) to be not sharing[EL]
Prop
ortio
n of
chi
ldre
n (%
)
Bryan Perry, Jan 2011Bristol
Different worlds …
62
1 1
47
1 1
33
2 3
12
4 36
12
7
2
33
15
0
60
32
0
25
50
75
borrowed money from familyand friends for everyday
needs [MORE than ONCEin last 12 mnths]
spot purchase of non-essential but desirable $250
item [NO RESTRICTION]
employed cleaner on aregular basis
Prop
ortio
n of
chi
ldre
n (%
)
Bryan Perry, Jan 2011Bristol
Children: cumulative disadvantage• ELs
– friends to birthday party– waterproof coat– separate bed– separate bedrooms for children of opp sex (10+)– all school uniform required
• Economising ‘a lot’– continued with worn out clothes/shoes– postponed visit to doctor– did not pick up prescription– unable to pay for school trip– went without music, dance, kapa haka, art, swimming, etc– involvement in sport had to be limited
Distribn of children across the LS levels (%)
lower to higher LS
12 10 18 18 41
% with 4+ deps 35 11 2 0 0
Bryan Perry, Jan 2011Bristol
ELSI is very useful as is, but it is still a work in progress
• Respondent burden– 40 items– have a ‘short-form’ of 25 items, but need to reduce further
• Compression in upper half of the scale– need for more items for modest to high living standards– potential with some ‘quality’ items, two new economising
items, and one about ‘no restrictions’ for making an ‘unplanned purchase’ of around GBP125
– would like to reduce reliance on global self-ratings
• Underlying conceptualisation of living standards– what does ELSI actually measure?
Bryan Perry, Jan 2011Bristol
What does ELSI actually measure?
• ELSI scores reflect the degree of financial restriction (freedom) that respondents report about consumption relative to desired consumption from a list of basics and non-basics …
• … that have been shown to reflect a common underlying or latent variable
Representative list of basics and non-basics (O & P)
Have
Don’t haveWant, don’t have because of cost (= enforced lack)
Want, don’t have for other
reasonsDon’t want
Score 1 0 1 1
Bryan Perry, Jan 2011Bristol
Implications for monitoring changes in material living standards over time
• ‘Our living standards are higher today than 20 years ago’ usually means that consumption is higher / more people have access to more of the goods and services considered out of reach 20 years ago.
• ELSI is about changes in consumption relative to desired consumption, not changes in consumption per se
• If expectations about consumption rise in step with rising living standards, then the average ELSI score is likely to show little or no change over time.
Bryan Perry, Jan 2011Bristol
Implications for monitoring changes in material living standards over time (cont’d)
• This is what we found from 2000 to 2004 to 2008 – no change in avg ELSI scores
• The way people respond to global self-ratings of living standards is consistent with ELSI’s ‘relative to desired consumption’ conceptualisation
– viz if a person’s living standards rise in rough step with those of their ‘reference group’ then their self-rating will remain much the same
• The ELSI conceptualisation of living standards is internally consistent … but there is a marketing challenge !
Bryan Perry, Jan 2011Bristol
FRILS?• We have experimented with a ‘Fixed Reference
Index of Living Standards’ (FRILS)– O and P items: have it / don’t have it– E items: economise a lot ≡ don’t have– SR items: omitted
Representative list of O, P and E basics and non-basics
Have
Don’t haveWant, don’t have because of cost (= enforced lack)
Want, don’t have for other
reasons
Don’t want
ELSI 1 0 1 1
FRILS 1 0 0 0
Bryan Perry, Jan 2011Bristol
ELSI and FRILS compared:point-in-time rankings
• rankings for the usual population groups are much the same for ELSI and FRILS
• main exception is for those aged 65+, esp singles … FRILS produces similar hardship rates but a much lower proportion with higher living standards
• ‘adaptive preferences’ for the 65+, esp the singles? compared with younger adults they report fewer ELs for a given number of lacks, and also satisfaction with less:
– to maintain dignity and/or sanity by saying they’re OK even when just getting by and ‘overstating’ self-ratings? or
– having found that that is a ‘better’ way to live?
Bryan Perry, Jan 2011Bristol
ELSI & FRILS compared: hardship ratesELSI FRILS
Overall 13 13
Age group0-17 19 1918-24 11 1125-44 14 1345-64 12 1165+ 4 3
EthnicityEuropean 10 9Maori 26 27Pacific 33 31Other 14 14
Bryan Perry, Jan 2011Bristol
Avg ELSI & FRILS scores compared
-20
-15
-10
-5
0
5
10
ben withdep
soleparent
two parent
single <65
couple<65
single 65+
couple 65+
diffe
renc
e fr
om o
vera
ll m
ean
ELSI FRILS
Bryan Perry, Jan 2011Bristol
ELSI & FRILS compared: ‘doing OK’ ratesELSI FRILS
Overall 50 51
Age group0-17 36 4318-24 45 4625-44 47 5145-64 62 6365+ 71 50
EthnicityEuropeanMaoriPacificOther
Bryan Perry, Jan 2011Bristol
ELSI & FRILS compared: ‘doing OK’ ratesELSI FRILS
Overall 50 51
Age group0-17 36 4318-24 45 4625-44 47 5145-64 62 6365+ 71 50
EthnicityEuropeanMaoriPacificOther
Bryan Perry, Jan 2011Bristol
ELSI and FRILS compared: tracking changes over time
• major difference for 2000 to 2004 to 2008– no change in ELSI mean– noticeable rise in FRILS mean
• using FRILS – there was an increasing proportion with higher scores (better living standards) … not so using ELSI
% with higher LS index: 2000 = 100
ELSI FRILS ELSI FRILS2000 31 29 100 100
2004 32 35 104 120
2008 32 41 104 140
Bryan Perry, Jan 2011Bristol
The current model
Ownership ELs
Participation ELs
Economising
SR material LS
SR income adequacy
Material living
standards
SR satisfaction with LS
Bryan Perry, Jan 2011Bristol
Possible next model
Ownership ELs
Participation ELs
Economising – few new ones
SR material LS
Ability to purchase non-necessities ‘at will’
Material living
standardsQuality of kitchen, furniture, other durables?
Bryan Perry, Jan 2011Bristol
International comparisons
• Return to deprivation indices
• Great value in having an internationally comparative NMI scale – EU 9 items, with all its limitations
Bryan Perry, Jan 2011Bristol
Hardship rate for population, EU indexEU + NO, IS and NZ, 2008
0
10
20
30
40
50
60
LU NO NL SE IS DK AT FI UK IE ES BE FR DE NZ SI IT EE CZ PT GR CY SK HU LT PL LV
Prop
ortio
n w
ith 3
+ en
fore
cd la
cks
(%)
NZ
Bryan Perry, Jan 2011Bristol
Hardship rate for those aged 65+, EU indexEU + NO, IS and NZ, 2008
0
10
20
30
40
50
60
LU NO NL SE NZ DK IE IS UK DE FI FR AT BE ES IT CZ SI EE PT GR HU LT PL SK CY LV
Prop
ortio
n w
ith 3
+ en
fore
cd la
cks
(%)
NZ
Bryan Perry, Jan 2011Bristol
Hardship rate for children (0-17), EU indexEU + NO, IS and NZ, 2008
0
10
20
30
40
50
60
LU NL NO SE DK ES FI IS AT DE SI EE IE BE FR UK MT NZ IT CZ GR PT CY LT SK PL HU
Prop
ortio
n w
ith 3
+ en
fore
cd la
cks
(%)
NZ
Bryan Perry, Jan 2011Bristol
0.6
0.8
1.0
1.2
1.4
1.6
1.8
0 5 10 15 20 25 30 35
Deprivation rate for children (%)
Ris
k ra
tio fo
r chi
ldre
n NZ
UK
NO FI
IE
BE
CZ
SI
This quadrant: above median
deprivation rate and above median risk
ratio
SK
DK IT
LU
NL
SE
ES
EE
GR
IS
AT
DE
FR
PTLT
CY
Bryan Perry, Jan 2011Bristol
Next steps• further index development
– improving ELSI for middle to high living standards– more thorough development of FRILS– deprivation indices – dimensions
– understanding drivers of low living standards?
• revised item list for SNZ surveys using the 25 item budget
• an official set of measures of poverty and hardship for NZ